Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

The Renewed Debate on Inclusionary Zoning

By

Stephen Smith and I co-wrote this post. In case you haven’t been following Stephen elsewhere, he’s also been writing at The Atlantic Cities and Bloomberg View.

 

This year, some of the first apartments and condos subject to inclusionary zoning laws in DC are hitting the market, stoking debate over development laws that the city adopted in 2007. The inclusionary zoning requirement is currently stalling the city’s West End Library renovation with Ralph Nader leading efforts to include an affordable housing aspect with the library project. Inclusionary zoning advocates often base their support on the desirability of mixed-income neighborhoods, while challengers argue that inclusionary zoning is an inefficient way to deliver housing with unintended consequences.

Heather Schwartz, who studies education and housing policies at the RAND Institute, says that one important feature of this policy tool is that it gives low-income families access to high-income neighborhoods while at the same time limiting the number of low-income residents in a neighborhood. She said, “Since IZ is a place-based strategy that tends to only apply to high-cost housing markets, it can offer access to lower-poverty places than housing vouchers and other forms of subsidized housing have historically done.”

David Alpert, editor-in-chief of Greater Greater Washington, a local urban planning blog, offers another argument in favor of inclusionary zoning, “a policy that builds support for both greater density and affordable housing,” he said in an email. “Much of the opposition to greater density involves a feeling that it is just a ‘giveaway’ to developers who make the profit and impose some collateral burden on a neighborhood, but many people are more supportive of the density if it serves an affordable housing goal.”

While inclusionary zoning proponents may see its ability to introduce just a few low-income residents to a higher income neighborhood as an asset, it does not typically meet an area’s demand for affordable housing. Montgomery County, MD, outside of Washington, DC has one of the nation’s most established inclusionary zoning problems. In over 30 years, inclusionary zoning has created fewer than 13,000 housing units in the county, which area developer AJ Jackson with EYA describes as “a drop in the bucket of housing demand.”

Jackson explains that the requirement to take a loss on some units leads developers to build only higher end housing, where they can make up the losses they take on the affordable units, making the remaining market-rate units still more expensive. Jackson suggests that the only viable solution to the problem of a lack of affordable housing is to increase allowable densities broadly. He points to several neighborhoods in DC and surrounding counties are currently zoned for commercial or light industrial uses, but that profitable residential development could succeed with zoning changes.

However, he points out the political obstacles to this type of development. He said, “For these jurisdictions, office density and jobs are great. But residents take more than they give in tax revenues,” so city officials may oppose residential development for budget purposes. An even greater obstacle may be current residents’ opposition, a well-documented setback to all sorts of DC-area projects from residential to restaurants.

The political incentives that confront politicians when they do decide to embrace more development complicate the density bonus calculus. The pro-density argument for inclusionary zoning is that the bonuses allow developers to build where they otherwise could not, but when an area is being targeted for development anyway, anti-density activists can easily anticipate bonuses when base zoning allowances are being hashed out and factor them in to their maximum tolerated building envelope. If those who oppose development in and of itself have enough clout, the “bonus” that developers can be reduced just a technicality.

For example, during the rezoning process for Manhattan’s West Chelsea neighborhood in 2005, New York City Assemblyman Richard N. Gottfried wrote in a statement that the city should follow the lead of the Hudson Yards rezoning, where the affordable housing programs were made “effectively, if not technically, mandatory,” which he attributed to “the leadership of Councilmember Christine Quinn,” now frontrunner to succeed Bloomberg as mayor.

The city did eventually take steps to increase the amount of affordable housing built by Hudson Yards developers by tweaking the “bonus” formula so that the rezoning yielded more affordable housing without more bulk than the administration’s proposal. Some below-market units were carved out of the proposed development, while others were pushed off-site – the affordable housing “will not generate additional bulk in the neighborhood through an inclusionary bonus,” as Chelsea Now wrote in 2009. The affordable apartments will be built on city-owned plots 15 blocks north, which given their location, were destined for development soon anyway.

And for those who support inclusionary zoning programs because of the extra density they can bring to neighborhoods, Assemblymember Gottfried’s suggestion for West Chelsea should be especially troublesome: “The Commission should look for places to lower the base FAR to allow the area available for affordable housing to increase.

Indeed that seems to be what happened. “Building density in the entire [West Chelsea] district has been reduced from the previous plan,” The Villager wrote the next month, “in order to provide more incentives for developers to apply for higher density under the inclusionary housing program.”

And New York City is not the only place that affordable housing groups have fought as-of-right density in the name of bonus incentive programs. Last year in California, some housing advocates were hostile to legislation, supported by developers and environmentalists, that would have forbidden municipalities in the state from requiring more than one parking space per unit in neighborhoods adjacent to frequent transit corridors.

As Lisa Payne, policy director at the Southern California Association of Nonprofit Housing, told the California Planning & Development Report in regards to their opposition to Assembly Bill 710, “We have 30 years of history with density bonus law, that recognizes the value of trading a planning concession, whether it be height, density, or parking for supplying the mix of incomes in a project. This bill would have removed that tool.” Affordable housing groups withheld their criticism of the 2012 iteration of the parking reform bill, but it has yet to pass.

While inclusionary zoning provides significant benefits to residents who are lucky enough to live in allotted affordable units, it does not provide sufficient housing units to address many cities’ housing affordability challenges, and in some cases can even breed alliances between affordable housing advocates and anti-density constituents. As Jackson explains, permitting more and denser development is the only viable path to this goal.

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  • benjaminhemric

    MARKET URBANISM PROS AND CONS OF INCLUSIONARY ZONING — Part I of V (?)

    I definitely agree that a relatively unrestrictive zoning (e.g., NYC’s 1916 zoning code) could be better than inclusionary zoning for both a) increasing affordable units b) AND increasing the number of successfully diverse neighborhoods.
    However, I think the arguments that are being made in this post are not as strong as they could be because they “ignore” three important distinctions (distinctions that the proponents of inclusionary zoning also tend to ignore and confuse).

    1) One distinction involves goals.
    Yes the two programs often, in fact, overlap — but, still, they are not the same thing. By ignoring the difference in goals between the two, it seems to me that both sides are presenting confused arguments (and are also “talking past” one another).
    Basically, the goal of inclusionary zoning (at least in terms of cities, as opposed to suburbs) is to maintain the long term health of existing (relatively) high-density districts and to create even more (i.e., increase the supply of) healthy high-density districts too (in part by providing housing for those who might be otherwise displaced by increased urban health). It’s a goal inspired (so it seems to me) by the work of Jane Jacobs, and it can applied to the need for healthy urban districts to have mixed uses as well as mixed incomes. That’s not to say that Jacobs should be held responsible for the way people may misunderstand and misapply her work — e.g., mixed use zoning along Fourth Avenue in Brooklyn.

    On the other hand, the goal of affordable housing is to create more housing for those of low- or moderate-incomes. Most of the time, so it seems to me, proponents of “affordable” housing don’t really care about maintaining the long term health of a city’s existing high density districts or increasing the supply of a city’s healthy high-density, mixed use districts. (It seems to me that, in fact, oftentimes they are actually hostile to the creation of healthy high-density, mixed use districts.)

    2) Another important distinction that is being ignored is the different effects of that increased densities have in existing low-density districts and high-density districts. Increasing densities in low-density districts is much more beneficial than increasing densities in districts that are already high-density districts. The former can greatly benefit from increased densities; the later can only marginally benefit from increased density — and, more often, can actually suffer if the density wipes out diversity. (It’s the law of diminishing returns.)

    3) A third distinction is the different goals between inclusionary housing in suburbs [where the goal is true inclusionary zoning making up for the inequity of past exclusionary zoning} and in cities [where the goal is to maintain the long term health of existing (relatively) high-density mixed use urban districts — or to create a greater supply of such districts).

    To be continued.

    Benjamin Hemric
    Tues., 10/16/12, 8:50 pm

  • benjaminhemric

    MARKET URBANISM PROS AND CONS OF INCLUSIONARY ZONING — Part II of V (?)
    Stephen Smith and Emily Washington wrote [added text within brackets is mine — BH]:

    Inclusionary zoning advocates often base their support on the desirability of mixed-income neighborhoods [which is the goal of inclusionary housing], while challengers argue that inclusionary zoning is an inefficient way to deliver housing [this is not the goal of inclusionary zoning, but the goal of affordable housing] with unintended consequences.

    Benjamin Hemric writes:

    This seems to me to be a good example of an instance where people are talking past one another.

    – – – – – – – – – – –

    Stephen Smith and Emily Washington wrote:

    Heather Schwartz . . . says that one important feature of this policy tool is that it gives low-income families access to high-income neighborhoods while at the same time limiting the number of low-income residents in a neighborhood. She said, “Since IZ is a place-based strategy that tends to only apply to high-cost housing markets, it can offer access to lower-poverty places than housing vouchers and other forms of subsidized housing have historically done.”

    Benjamin Hemric writes:

    It seems to me that this reflects the goal of inclusionary zoning.

    – – – – – – – – –

    Stephen Smith and Emily Washington wrote [added text within brackets is mine — BH]:

    David Alpert . . . offers another argument in favor of inclusionary zoning, “a policy that builds support for both greater density and affordable housing,” he said in an email. “Much of the opposition to greater density involves a feeling that it is just a ‘giveaway’ to developers who make the profit and impose some collateral burden on a neighborhood [when in fact they , but many people are more supportive of the density if it serves an affordable housing goal.”

    Benjamin Hemric writes:

    David Alpert’s arguments also seem to reflect the goals of inclusionary zoning, but in a tactical roundabout way: a) high-densities can be good for city districts (if they suffer from too little density); b) but people generally oppose high-densities nevertheless; c) so maybe if we attach a “social cause” to increased density, we can then get the higher densities that are also good for urban districts.

    – – – – – – – – – – –

    Stephen Smith and Emily Washington wrote [added emphasis is mine — BH]:

    While INCLUSIONARY ZONING proponents may see its ability to introduce just a few low-income residents to a higher income neighborhood as an asset, it does not typically meet an area’s demand for AFFORDABLE HOUSING.

    Benjamin Hemric writes:

    This is another example of two sides talking past one another.
    To be continued.

    Benjain Hemric
    Tues., 10/16/12, 8:55 pm

  • benjaminhemric

    MARKET URBANISM PROS AND CONS OF INCLUSIONARY ZONING — Part III of V (?)
    Stephen Smith and Emily Washington wrote:

    Montgomery County . . . has one of the nation’s most established inclusionary zoning problems. In over 30 years, inclusionary zoning has created fewer than 13,000 housing units in the county, which area developer AJ Jackson with EYA describes as “a drop in the bucket of housing demand.”

    Benjamin Hemric writes:

    I’m not that familiar with Montgomery County, so I say this very tenatively: But from a quick look at the info on Wikipedia, Montgomery County seems to be more of a RELATIVELYsuburban jurisdiction than an urban one (e.g., New York County — Manhattan). Thus the goals of this program could be, basically, different. The idea of “urban” inclusionary zoning is to maintain the long-term healthy of exisiting (relatively) high-density, mixed use districts (and to provide housing for those who might be displaced by increased urban health). In a RELATIVELY suburban jurisdiction, the goal of inclusionary zoning could be different — to have a suburban county make up for its past bad behavior of exclusionary zoning and bear its “fair share” of low- and moderate-income people (who would likely use more in the way of expensive government services, and thus might be seen by original suburbanites as constituting a drain on a jurisdictions fiscal resources).

    – – – – – – – –

    Stephen Smith and Emily Washington wrote [added emphasis and added text (for clarity?) is mine — BH]:

    Jackson . . . suggests that the only viable solution to the problem of a lack of affordable housing is to increase allowable densities broadly. HE POINTS TO SEVERAL NEIGHBORHOODS IN DC AND SURROUNDINGCOUNTIES [that] are currently zoned for commercial or light industrial uses, but [where] profitable residential development could succeed with zoning changes.

    Benjamin Hemric writes:

    As written (even in the unedited version in the original post above) this seems to be a “weird” argument. Shouldn’t he be arguing for increasing allowable densities broadly (instead of via “inclusionary zoning”) in Montgomery County? As written, at least, this seems like a sly attempt to preserve exclusionary zoning! (Keep the poor people in other counties and other jurisdictions, like Washington D.C.!)

    To be continued.
    Benjamin Hemric
    Tues., 10/16/12, 9:00 pm

  • benjaminhemric

    MARKET URBANISM PROS AND CONS OF INCLUSIONARY ZONING — Part IV of V (?)
    Stephen Smith and Emily Washington wrote [added text within brackets is what I believe is being meant — BH]:

    The pro-density argument for inclusionary zoning is that the bonuses allow developers to build where they otherwise could not but when an area is being targeted for development anyway, anti-density activists can easily anticipate bonuses when base zoning allowances are being hashed out and factor them in to their maximum tolerated building envelope. If those who oppose development in and of itself have enough clout, the “bonus” that developers [would get] can be [significantly] reduced [and become] just a technicality.

    Benjamin Hemric writes:

    Very true — and this is but one sad representation of the “degradation” of true zoning for things like “light and air,” etc. Today, the original legitimate reasons for zoning regulations like height and set back regulations are being used as bargaining chips — while the original justification (and legitimization) for regulations are being increasinly ignored.

    – – – – – – – – – – –

    Stephen Smith and Emily Washington wrote [added emphasis is mine — BH]:

    Some below-market units were carved out of the proposed development, while others WERE PUSHED OFF-SITE – the AFFORDABLE HOUSING “will not generate additional bulk in the neighborhood through an inclusionary bonus,” as Chelsea Now wrote in 2009. The affordable apartments will be built on city-owned plots 15 blocks north, which given their location, were destined for development soon anyway.

    Benjamin Hemric writes:

    Another very sad example of the degredation of zoning. And it also seems that this might be a good case of where people are being “hoodwinked” because they are not recognizing the difference between “inclusionary zoning” and “affordable housing.” In inclusionary zoning terms, pushing the low-income units off-site is a travesty — it obliterates the underlying reasoning supporting inclusionary zoning!

    – – – – – – – –

    Stephen Smith and Emily Washington wrote:

    And for those who support inclusionary zoning programs because of the extra density they can bring to neighborhoods, Assemblymember Gottfried’s suggestion for West Chelsea should be especially troublesome: “The Commission should look for places to lower the base FAR to allow the area available for affordable housing to increase.”

    Indeed that seems to be what happened. “Building density in the entire [West Chelsea] district has been reduced from the previous plan,” The Villager wrote the next month, “in order to provide more incentives for developers to apply for higher density under the inclusionary housing program.”

    Benjamin Hemric writes:

    Good paticular example of the general distortion of the legitimate underlying reasons for zoning. Plus it shows that people really do NOT accept the idea forwarded by Jane Jacobs that high densities are, essentially, good for urban districts (most especially when they are accompanied by small blocks, mixed uses, mix of building types, etc.).

    – – – – – – – – – – –

    Stephen Smith and Emily Washington wrote:

    Last year in California, some housing advocates were hostile to legislation, supported by developers and environmentalists, that would have forbidden municipalities in the state from requiring more than one parking space per unit in neighborhoods adjacent to frequent transit corridors.

    Benjamin Hemric writes:

    Again, although the goals of developers and environmentalists may be laudable, this controversy seems to be about a very different kind of “inclusionary zoning” (suburban, not urban) and different kind of “affordable housing” (suburban and car oriented, not urban). (In other words, the goal is not to maintain the health of an existing high-density, mixed-use area; the goal is not to create housing for those who might be displaced by increased urban health; etc.)

    Again, it seems to me that ignorning three important distinctions has lead to confusion rather than clarity.

    – – – – – – – – –

    Stephen Smith and Emily Washington wrote:

    As Lisa Payne . . . told the California Planning & Development Report . . . “We have 30 years of history with density bonus law, that recognizes the value of trading a planning concession, whether it be height, density, or parking for supplying the mix of incomes in a project. This bill would have removed that tool.”

    Benjamin Hemric wrote:

    Again, while the goals may be laudable, this is another sad example of where people (from both sides) seem to be overlooking the legitimate underlying justifications for zoning and making zoning into a bargaining chip instead.
    Still to be continued — perhaps tomorrow.

    Benjamin Hemric
    Tues., October 16, 2012, 9:05 pm

  • Peaton

    Because of the problems of homelessness and job access, the issue of low income housing is important. There may be a need to intervene in markets. However, I don’t see any reason why this should be tied to density. Moreover, the basic premise that land use regulation should across-the-board limit density is a problem. There maybe real arguments for some design regulations, re sun, impervious surface, etc, but none of these are directly connected to density. NY has vast swaths of land where apartments cannot be built, yet people commute long distances. Density restrictions may not keep everyone out, but they do exclude many residents and also clog the negotiation of new urban projects, slowing speed to market. Mandating affordable housing maybe necessary, but it should be seen as a second step after urban housing markets are freely allowed to build to densities which may bring housing prices down.

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